401K Early Withdrawal

debdon · #1 Oct 12, 2006, 08:08 AM

My company was purchased by another company that has established a new 401K. I have not yet done anything with my previous 401K. I would like to take the cash from my previous 401K and pay off my son's school loan. If I use the money to pay of the education loan, I know I will have to pay taxes on it but will I also have to pay a penalty since I am not yet 59 1/2?

RichardBondMan · Oct 26, 2006, 05:41 PM

Quote:

Originally Posted by debdon

My company was purchased by another company that has established a new 401K. I have not yet done anything with my previous 401K. I would like to take the cash from my previous 401K and pay off my son's school loan. If I use the money to pay of the education loan, I know I will have to pay taxes on it but will I also have to pay a penalty since I am not yet 59 1/2?

I am no CPA but my guess is yes you would have to pay taxes on the withdrawal just as though it were earned income, why not see if you have loan privileges, then there is no penalty, just interest on the loan. Try to avoid the tax penalty.



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